Thursday, April 15, 2010
OK, I've been trying to avoid politics on this blog, so please don't take this post as a position for or against former President Bush.
Still, this article in today's Wall Street Journal highlights something that many have overlooked in their discussions of Roth IRA conversions.
Namely, the IRS is doing this to raise revenue, not to offer attractive retirement benefits to citizens.
And, according to this article, the possible tax revenues could be enormous, depending on how many people decide to do the conversion.
Quoting from the piece:
My firm, Trend Macrolytics, estimates that there is at least $9 trillion in these tax-deferred vehicles. About 60% of that, or $5.4 trillion, is in the hands of the wealthiest 10% of households, and most of that is eligible to be converted If just 10% of it is converted, then taxes would be paid on $540 billion at a 35% rate - generating a $189 billion revenue surprise for the US Treasury.
My point? If you think about the conversion as simply a vehicle for the government to get your tax dollars early - and not a benevolent windfall opportunity - the Roth conversion may not necessarily the golden opportunity that some are promoting.
George W. Bush's 2010 Tax Miracle - WSJ.com